Church Mut. Ins. Co. v. Travelers Cas. Sur. Co. of Am.
| Decision Date | 06 April 2021 |
| Docket Number | 19-cv-297-wmc |
| Parties | CHURCH MUTUAL INSURANCE COMPANY, Plaintiff, v. TRAVELERS CASUALTY SURETY COMPANY OF AMERICA, Defendant. |
| Court | U.S. District Court — Western District of Wisconsin |
Heidi L. Vogt, Janet E. Cain, Von Briesen & Roper, s.c., Milwaukee, WI, Michael Patrick Crooks, Von Briesen & Roper, S.C., Madison, WI, for Plaintiff.
Matthew M. Collibee, Scott Anthony Schechter, Kaufman Borgeest & Ryan, Valhalla, NY, Thomas R. Schrimpf, Hinshaw & Culbertson LLP, Milwaukee, WI, for Defendant.
On May 1, 2016, the Cathedral of St. Sava was destroyed by fire. Insured at the time by plaintiff Church Mutual Insurance Company, the cathedral was subject to an indemnity limit of $12,739,000 for its replacement costs. Although paid the policy limits, the insured, St. Sava Serbian Orthodox Church ("St. Sava") proceeded to sue Church Mutual for recommending an inadequate replacement cost limit. Ultimately settling with St. Sava, Church Mutual then brought this lawsuit, seeking reimbursement for its settlement costs from defendant Travelers Casualty and Surety Company of America ("Travelers") under a professional liability policy ("the Travelers Policy" or "the Policy").1
Presently before the court are the parties’ cross-motions for summary judgment. Specifically, Church Mutual seeks a declaration as a matter of law that: the Travelers Policy covers St. Sava's claim; no exclusions apply; and accordingly, Travelers’ refusal to reimburse Church Mutual for its settlement costs under the Policy constitutes a bad faith breach of an insurance contract. (Pl.’s Br. (dkt. #36) 1.) For its part, Travelers seeks a declaration as a matter of law that it has no obligation to provide indemnity coverage for St. Sava's claim under the Policy, both because there was no initial grant of coverage and because of an express coverage exclusion. (Def.’s Br. (dkt. #48) 2.) At minimum, Travelers seeks summary judgment on Church Mutual's bad faith claim. (Id. )
The threshold question under the parties’ cross-motions is whether the Travelers Policy granted coverage to Church Mutual for recommendations of replacement cost limits. Under the terms of the Policy, the parties agree the answer to this question comes down to: (1) whether Church Mutual's valuation of the cathedral's replacement cost was an act of "loss control"; or (2) whether the only licensed insurance agent who was involved in the St. Sava account, Sal Perez, committed a "wrongful act" causing St. Sava's injury by participating in Church Mutual's valuation. As set forth below, the court concludes that the undisputed facts establish Perez was not a part of the valuation process, but Church Mutual's erroneous valuation of the cathedral's replacement costs was an act of loss control. While finding an initial grant of coverage, however, the court also concludes that the claim falls under one of the Policy's coverage exclusions for "estimate of probable construction costs." Having concluded that the claim was excluded from coverage under the Policy, the court need not consider whether Travelers acted in bad faith. Accordingly, the court will grant summary judgment in favor of Travelers and against Church Mutual.
The Travelers Policy was issued by Travelers ("Company ") to Church Mutual managers and employees ("Insureds ") for the policy period of July 1, 2017, to July 1, 2018. (Schechter Decl., Ex. C (Travelers Policy) (dkt. #50-3).) Of particular relevance to this case is the Insurance Company Professional Liability Coverage section of the Policy, which provides in relevant part:
The Company will pay, on behalf of the Insureds, Loss that the Insureds become legally obligated to pay on account of any Claim first made against such Insureds , individually or otherwise, during the Policy Period , or any applicable Extended Reporting Period , for a Wrongful Act occurring before or during the Policy Period .
(Id. at 25 (emphases in original).) "Wrongful Act " is defined in the Policy as:
any actual or alleged error, misstatement, misleading statement, act, omission, neglect, or breach of duty, committed or attempted by or on behalf of any Insured , in their capacity as such, in performing, rendering, or failing to perform or render Professional Services .
(Id. at 29 (emphases in original).) "Professional Services " is defined as:
(Id. at 25 (emphases in original).)
The Policy also contains an endorsement that expressly adds to the scope of professional liability coverage for acts of insurance agents and brokers. (Id. at 42.) This endorsement provides in relevant part:
(Id. (emphases in original).) The endorsement defines "Insurance Agents and Brokers Services Act " as "any actual or alleged error, misstatement, misleading statement, act, omission, neglect, or breach of duty committed or attempted by any Insured, in their capacity as a licensed agent or broker, in the sale, placement, or servicing of a Contract of Insurance ." (Id. (emphasis in original).)
Finally, the Policy contains the following exclusion:
(Id. at 31 (emphases in original).) Neither the term "loss control" (referred to in the definition of Professional Services above) nor the term "construction costs" (referred to in Exclusion 13 above) are defined in the Policy.
The Church Mutual website defines "loss control" as "methods taken to reduce the frequency and/or severity of loss." (Crooks Decl., Ex. 4 (dkt. #29-4).) Additionally, Church Mutual's marketing brochure titled "Risk Control" provides:
(Crooks Decl., Ex. 7 (dkt. #30-2).) Replacement cost valuation at Church Mutual is done by its Risk Control Department, which used to be called the "Loss Control Department." (Id. )
Similarly, various publications from Travelers include a heading devoted to "Risk Control", with a subsection regarding "insurance to value assessments" to assist customers in evaluating whether they have sufficient property insurance limits in place to cover potential losses. (Third Crooks Decl., Ex. A (dkt. #70-1).) For example, a publication apparently directed at plastics and rubber goods manufacturers provides:
(Id. at 7.)
Todd Blachier, who manages Church Mutual's risk control department, testified that he understands "construction costs" to mean the walls of the building, and "replacement cost" to include the construction quality of the building and everything that is encompassed within the building above standard construction, such as stained glass, organs, or fireplaces. Karen Sundquist, Church Mutual's Underwriting Supervisor, likewise testified that construction costs include the base building materials, and is only one part of the replacement cost valuation.
Sal Perez is a licensed insurance agent. He was the primary point of contact between Church Mutual and St. Sava. His general duties included making contact with a prospective insured, gathering information from the prospective insured, and taking photos and measurements of the building to be insured, then entering that information into a computer program to get the value of the building.
As defendant points out, however, there is no evidence in the record indicating that Perez performed any valuation duties with respect to the St. Sava policy. To the contrary, Perez specifically testified that he never prepared a valuation report for the St. Sava account, and he did not have input into the replacement cost value for St. Sava. (Perez Dep. (dkt. #32-1) 63:17-24,...
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